* German ZEW investor morale hits lowest since Dec. 2012

* OECD urges more aggressive action from the ECB

* Investors watching Fed, Scotland vote (Updates prices into close, adds new comment)

By Emelia Sithole-Matarise

LONDON, Sept 16 (Reuters) - Ten-year Bund yields briefly fell back below 1 percent on Tuesday as data showed German investor morale hit its lowest in nearly two years in September, suggesting tensions between Russia and the West had hit Europe's largest economy.

The ZEW survey showed economic sentiment dropping for a ninth straight month.

Adding to a grim growth outlook, the OECD on Monday cut its forecasts for major developed economies including the euro zone, and urged more aggressive European Central Bank stimulus to ward off deflation in the currency bloc.

Yields moved higher in the afternoon, however, with investors turning cautious before the U.S. Federal Reserve's policy decision on Wednesday and Scotland's independence referendum on Thursday. The latter may have ripple effects on separatist movements elsewhere in Europe, particularly in Spain.

"We rallied in the morning but with the Fed meeting coming up the market is getting ... cold feet," said David Schnautz, rate strategist at Commerzbank. "The risks are tilted towards a hawkish surprise."

German 10-year yields, the benchmark for euro zone borrowing costs, fell as low as 0.984 percent before bouncing back to trade flat on the day at 1.02 percent.

SCOTS, FED EYED

Investors will be scanning Wednesday's Fed meeting outcome for clues on the timing of the first U.S. rate hike in more than eight years. The market does not expect the Fed to raise rates until 2015, but recent strong U.S. economic data has led central bank officials to acknowledge they may need to act sooner than they thought just a few months ago.

The U.S. monetary outlook contrasts with the ECB's ultra-loose policy stance in the face of shrinking inflation and a stuttering economic recovery.

The ECB surprised markets by cutting interest rates a week ago and unveiled plans to buy asset-backed securities and covered bonds, but stopped short of a full-fledged money printing scheme that would include buying sovereign bonds.

Some in the market doubt the latest measures are enough to fend off deflation and stimulate growth threatened by tit-for-tat sanctions between the West and Russia over violence in Ukraine. They expect the central bank eventually to embark on money printing, known as quantitative easing.

"The mood surrounding the euro zone recovery is far less optimistic than it was during the first half of this year so the market is maybe expecting more from the ECB," said Cyril Regnat, a fixed income strategist at Natixis.

Yields on peripheral euro zone bonds were flat to slightly higher, with Spanish 10-year yields 0.5 bps up at 2.354 percent.

The yields have bounced off record lows just above 2 percent, hit after the ECB rate cut, as some investors worry the Scottish vote will embolden separatists in wealthy Catalonia.

"Spreads have been widening for a few days now. Initially it was driven by a bit of supply, but also the Scottish vote and what that means for Catalonia," said Myles Bradshaw, Pimco's European strategist and portfolio manager.

"What you are seeing is investors just taking some profits and that has caused Spanish spreads to widen, and a repricing of the periphery more broadly." (Additional reporting by Marius Zaharia; Editing by Nigel Stephenson and John Stonestreet)